RegTech and compliance management
RegTech is composed of the words “regulatory” and “technology”. It is a collective term for the application of modern technologies, to get the increasing regulation in the banking- and financial sector under control both from an IT and a legal standpoint.
Attitude of the country towards RegTech-services
In general, the MoF and NBRM are supportive of the fintech sector. Pursuant to the conducted survey on the Development of the FinTech Sector in North Macedonia by NBRM in October 2020, main obstacles for faster development of the FinTech sector are the small market and the regulatory framework. In the part of the regulatory framework, three (3) segments are pointed out: (i) the regulation in the part of personal data protection; (ii) the regulation for prevention of money laundering; and (iii) the regulation that regulates the payment services and payment systems.
There are concerns that FinTech companies will not have the same strictness of compliance as financial institutions have set up currently. The entire financial system could be exposed to unnecessary or unintended risks, cyber security as the biggest among them, as financial services become more digitised and carried out in the cloud.
However, in accordance with the survey, the Ministry of Information Society and Administration confirmed that North Macedonia has a stable financial services sector and believe that there is room for improvement in the availability and quality of financial products and services for consumers and small businesses. Implementation of RegTech and SupTech will help the sector comply more effectively and efficiently, making the financial system stronger.
Additionally, the regulation of the payment system will be covered with the adoption of the Draft Law, which is already in the final stage, and it is expected that it will be adopted soon. Furthermore, NBRM is working on the development of the National Strategy for the Fintech Sector. This project is supported by the European Fund for Southeast Europe (EFSE), and it is expected that in the first half of the year the first national strategy will be adopted, which will clearly identify the areas, as well as include measures and activities to support financial innovation.
Obligations and requirements to provide RegTech-services
At the moment, there is no specific regulation which regulates the RegTech-services in North Macedonia. Until the adoption of the Draft Law, FinTech companies that provide RegTech-services are subject to the legislation and regulations that apply to financial services companies.
Additional comments regarding the legal situation for RegTech-services or what RegTech’s must be aware of in this business area
With the adoption of the Draft Law, the entry of new institutions on the market will be enabled, especially from the FinTech sector, which offer payment services through innovative and digitalised solutions, which will strengthen the competition on the market in terms of quality of service and in terms of costs. In addition, it will affect the reduction of cash circulation, which means better control and more effective fight against the grey economy. In the same direction, the AML and CTF Draft-Law is in procedure, which will introduce a framework for the use and control of crypto currencies, as a new innovative financial product, but also the development perspectives towards the means of payment of the future.
Market size for RegTech-services and biggest companies in this business area
Having in mind that RegTech-services in North Macedonia are currently provided only by financial institutions and by an entity to which they are outsourced in accordance with the law, the market is lowly developed.
Additional comments regarding the economic situation for RegTech-services or what RegTech’s must be aware of in this business area
As previously indicated, in accordance with the survey, the main challenge in the development of the FinTech sector in general, are the security risks, due to the possibility of cyber-attacks, financial crime, and money laundering. This, in fact, is the most frequently mentioned risk globally when it comes to the risks and challenges associated with the FinTech sector.